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The Mystery of Wheat Stocks in China: What Does This Man Know That Others in the World Do Not Know?

2022-06-13 17:36:45Pikëpamje SHKRUAR NGA FEDERICO RAMPINI
The Mystery of Wheat Stocks in China: What Does This Man Know That Others in the
The mystery of wheat stocks in China

There is a country in the world that, despite being a major importer of wheat, is not suffering from the current crisis, may even actually benefit from it.

For "mysterious" reasons, she has amassed more wheat reserves than the rest of the world combined.

Began to do so long before Vladimir Putin launched the latest military aggression on Ukrainian soil.

The enigma of Beijing's food reserves could only be solved if Xi Jinping wanted to speak.

For now we can only allude to the possible explanations and developments that will take place.

The data are official and one of the most reliable sources in this sector is the U.S. Agricultural Services Overseas.

The grain reserves held in Chinese barns exceed 140 megatons (millions of tons).

In itself, this is important news.

It is reassuring if this figure is compared to the amount of grain missing in world markets, due to the Russian occupation of Ukraine: 50 or 60 megatons.

However, the large amount of Chinese stocks is worrying when compared to the wheat stocks available in the rest of the world.

The Western Coalition of the United States, Europe, Canada and Australia is barely approaching 40 megatons of grain in reserve.

South Asia, which includes India, has fewer than us (but it is true that India has become a major producer / exporter of wheat).

The area that includes the Middle East and North Africa has reserves for about half of the West.

If all these reserves are combined, the outcome is positive and at the same time disturbing: the world with 280 megatons of grain has enough to withstand Putin's blackmail that catches Ukraine's exports.

As in the case of fossil fuels, we are not really facing shortages and some price increases are excessive compared to the real imbalances between supply and demand.

However, partial turmoil in some traditional supply flows is enough to drive markets into fibrillation.

Furthermore, wheat stocks are managed by each nation, according to specific criteria, they are not available to everyone to deal with local emergencies.

The "Chinese mystery" still remains.

Gathering all of the rest of the world's grain reserves, it remains below 140 megatons available to China. Its demographic size is not enough to explain this disproportion.

Even with 1.4 billion inhabitants, the People's Republic does not represent half of the world's population (we are about eight billion).

The oversupply of its stocks is the result of a deliberate policy, of an accumulation that began long before the start of the war in Ukraine.

Xi Jinping "knew" well in advance what Putin would do and predicted the consequences in the world food market?

Of course, the first phase of Russian aggression dates back to 2014, so this explanation is not entirely remote. However, it needs to be introduced in a broader context.

The Chinese communist leadership is obsessed with the problem of food self-sufficiency, which, among other things, prompts its expansion policies in Africa and Latin America.

Beijing executives may also have predicted a return to global demand following COVID ahead of time.

The communist nomenclature fears inflation, not forgetting that the high cost of living was one of the causes of the outbreak of social protests that led to the 1989 Tiananmen Square tragedy.

Of course, as "traders" and speculators, the Chinese rulers had an extraordinary talent: if they were to start selling their surplus stocks in the markets today, they would have phenomenal profits.

Will they do it? When will they do it? Are you?

Unlike oil stocks, wheat stocks cannot be maintained indefinitely: they can expire.

In an active management of this great food heritage, on which Xi Jinping "sits", many conclusions and simulations can be reached.

Gradual sales in the markets, in addition to profits to the benefit of the Chinese state coffers, would have a calming effect on world prices; however it would be harm done to Putin, who would be deprived of food blackmail.

Can we imagine a major humanitarian diplomacy, in which Beijing will provide grain aid to the countries most affected by the current crisis, in the areas of North Africa and the Middle East?

Sooner or later we will find out what strategy and what calculation will Xi Jinping adapt to use his power in the food crisis.

But it remains a mystery why he arrived so prepared at the moment…

Federico Rampini / Corriere della Sera

 


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